Authorities in the world's second-largest economy on Monday declared the new nationwide policy, which offers parents the equivalent of around $500 per child under the age of three per year.
"The childcare subsidy system can directly increase people's cash income," Guo Yanhong, vice minister of China's National Health Commission (NHC), said at a press conference in Beijing on Wednesday.
The measure "will better protect and improve people's livelihoods", Guo said.
"At the same time, it will help promote a virtuous cycle of improving people's livelihoods and economic development, adding new impetus to the sustained and healthy development of the economy," she added.
Chinese leaders have in recent years struggled to breathe life into the economy, beset by a yearslong property crisis that has spooked would-be homebuyers and dissuaded many people from having children.
Beijing has since late last year introduced a series of aggressive pro-consumption policy measures -- including key rate cuts and cancellations of certain restrictions on homebuying -- but results have been limited.
The slump comes as worrying demographic trends have become more pronounced.
China's population declined by 1.39 million last year, and marriage rates now sit at record lows.
At Wednesday's press conference in Beijing, NHC official Wang Haidong acknowledged that the country has "gradually shifted from a phase of population growth to a phase of population decline".
"To adapt to this new demographic landscape, the country is accelerating the improvement of its fertility support policy system, continuously reducing burdens on families of childbirth, raising children and educating them," said Wang.
This, added Wang, would help in "promoting the construction of a fertility-friendly society".
Zichun Huang, China economist at Capital Economics, told AFP this week that the sum of $500 per child was too small to have a "near-term impact on the birth rate or consumption", but the policy could lay the groundwork for further child subsidies in the future.
A finance ministry official said 90 billion yuan ($12.5 billion) had been set aside as a preliminary budget for the new scheme this year.
Also on Wednesday, China's top leaders gathered for a meeting on the economy chaired by President Xi Jinping, state media reported.
In a speech, Xi noted "numerous risks and challenges" facing the economy, calling for the government to "strengthen macroeconomic policies and intensify them at the appropriate time", state news agency Xinhua reported.
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